Vilinova v Vilinov & Anor

A document is a sham where the parties share an intention that it should create the appearance of legal rights and obligations different from those they actually intend to create. A company director’s collateral representations may be attributed to the company where he contracts on its behalf. In Part III proceedings under the Matrimonial and Family Proceedings Act 1984, the court must assess whether English relief is appropriate and apply the statutory factors. Relief is not confined to the minimum necessary to remedy injustice, but cannot exceed what would have been awarded in equivalent English proceedings. Strong connections, a long marriage and equal contributions may justify an element of sharing, rather than a needs-only award. Declaratory relief remains discretionary and should be granted sparingly, but may be appropriate to resolve a real dispute and protect a party from threatened repetition of an unenforceable claim.

The former wife sought financial relief in England under Part III of the Matrimonial and Family Proceedings Act 1984 following a Russian divorce. Hinaly Company Limited was joined to the proceedings after asserting that the wife owed it £2 million plus interest under two loan documents. Hinaly initially participated but later failed to comply with disclosure and pleading orders and ceased to attend. The husband did not engage with the proceedings.

The central issues were whether the loan documents were genuine and enforceable, whether a formal declaration should be made, whether an English court should grant financial relief, and the appropriate amount and costs consequences.

1. Loan documents. The wife bore the burden of proving, on the balance of probabilities, that the agreements were shams. Applying Snook v London and West Riding Investments Ltd [1967] 2 QB 786, as elaborated in National Westminster Bank Plc v Jones [2001] 1 BCLC and Stone v Hitch [2001] EWCA Civ 63, the relevant question was whether all parties intended the documents to create the apparent legal rights and obligations. The husband’s representations that the loan was only for tax purposes, that the money was a gift and that repayment would never be required established the necessary common intention. Both documents were shams and the wife owed Hinaly nothing.
2. Declaration. Declaratory relief is discretionary and rare in private-law disputes. The court considered whether there was a real dispute, whether the parties and legal rights were properly before it, whether the proposed declaration was precise, whether it served a useful purpose, and the justice owed to each party. Those requirements were satisfied. The court declared that both loan documents were shams and that the wife was not indebted to Hinaly.
3. Part III relief. The wife satisfied the jurisdictional requirement in section 15(1)(b) of the 1984 Act. The restrictions in section 20 did not apply. Relief was appropriate under section 16 because of the parties’ substantial English connections, the absence of adequate Russian financial relief, and the fact that enforcement difficulties did not make the proceedings pointless. The court applied the principles drawn from Agbaje v Agbaje [2010] UKSC 13, including that relief is not limited to the minimum required to overcome injustice, but cannot exceed an equivalent domestic award.
4. The long marriage, equal contributions and marital origin of the wealth justified an element of sharing rather than a needs-only award. A lump sum of £5 million was ordered on a clean-break basis. Hinaly and the husband were jointly and severally liable for the wife’s indemnity costs, summarily assessed at £170,000. Payment was ordered by 31 July 2019, thereafter attracting judgment-rate interest.